1 The nature of economics

Question 1

simplification

Answer 1

implies that some factors have been included in the model and some have been omitted

Question 2

ceteris paribus

Answer 2

all other things remaining the same

Question 3

Production possibility frontier

Answer 3

shows how much an economy can produce given existing resources

Question 4

scientific method

Answer 4

a method that subjects theories or hypotheses to being disproved by empirical evidence

Question 5

Why is it not possible to set up experiments to test hypothesis in economics?

Answer 5

It is difficult to keep one factor varied and the other factors constant in the real world.

Question 6

Positive economics

Answer 6

the scientific objective study of the allocation of resources

Question 7

Positive statements

Answer 7

statements that can be supported or refuted by evidence.

Question 8

normative economics

Answer 8

the study and presentation of policy prescriptions involving value judgements about the way in which scarce resources are allocated

Question 9

normative statements

Answer 9

statements that cannot be supported or refuted because it is a value judgement.

Question 10

law

Answer 10

a model or theory that has been verifies by empirical evidence